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Three businesses share tips on how to secure quality and timely production, and foster strong relationships with suppliers.

When Alexandra Arens founded her Peruvian homewares business, Claribel, she knew that ethical production and a transparent supply chain were a high priority.

“The only way that small businesses can ensure ethical production is by being in the country, at the workshop, and developing a relationship with the suppliers,” explains the founder, who was looking for suppliers that not only offered a high level of transparency, but also reasonable prices and the ability to fulfil orders on time.

It proved to be a challenge. Ms Arens and her Lima-based co-founder, Mariana Barrios, chose a packaging supplier whom they were confident shared their commitment to staff well-being and other values, but when it came down to it, the basics were not quite there.

“On the day that our packaging was expected to be delivered, they were not ready and had not even been sent in for production,” remembers Ms Arens.

Claribel was due to launch the following week, so the founders needed a new packaging supplier immediately. Fortunately, they were put in touch with a family-run company that could offer the transparency that they required and produce the necessary orders at short notice.

Visiting our contractors helps us to determine the quality of their workJason Choy, Welcome Gate

“We could not have turned this crisis around if we were not on the ground in Peru at the time, so I recommend meeting suppliers in person,” she says, adding that while the best suppliers are in high demand, there’s still a very informal way of doing things in developing markets.

“Be sure to get things in writing, such as a commitment to dates, and be sure that employees are being fairly treated and compensated.”

Test the waters

As Jason Choy grew his tech security firm, Welcome Gate, it became apparent that he needed to outsource a portion of the installation and maintenance of systems to third-party contractors.

But the company initially received complaints from clients that contractors were providing an inconsistent service, arriving late and not being as attentive as its own staff. To put a stop to this, Mr Choy adopted a more thorough approach to screening potential new suppliers.

Background research now includes checking prospective partners’ credit ratings, social media, and comments from staff on Glass Door, as well as the company’s own website, he explains. Welcome Gate employees then visit the prospective contractor’s offices and arrange a meeting with one of its clients.

“Visiting gives us a sense of how they present themselves, helps us to determine the quality of the work, and get real feedback,” says the business owner, who adds that his team take into account everything from friendliness of staff to cleanliness of the toilets.

It also tells them about the strengths and weaknesses of prospective partners, and how they work in difficult or challenging situations.

All these little things put together gives the company a good idea of whether a partner is the right one. “It also means that we’re fair to them, so that they know what our expectations are from the start,” says Mr Choy, who adds that taking such a diligent approach has paid off; Welcome Gate has secured a contract with a client that’s growing internationally.

“We now have the opportunity to grow our business globally.”

Negotiate terms with big suppliers

Jonathan Shine’s video invitation business, Mini Epic, requires a lot of digital services from web agencies. In its first year, he signed a 12-month contract with a large web agency to build and manage his website.

“But we didn’t fully understand all the terms and conditions of our service level agreement,” he admits.

Mr Shine had agreed to spend £800 per month with the agency, regardless of whether Mini Epic used services to that value. After two months, he realised that he was paying for services that he was not using. “Working with a big agency meant that we felt like a small fish,” he says.

Even when the founder tried to use the services as much as possible, he found that being a small client meant that he wasn’t getting the perks of the agency’s gold standard service, such as customer queries being handled within 24 hours, rather than 72. For nine months of the year, the company was not even using the full services for which it was paying.

For the second year, Mr Shine renegotiated the service level agreement (SLA) to enable him more flexibility and to pay for agency services as he used them.

“Small businesses can feel beholden to suppliers whose provisions are integral to their own products and services,” he says. “But don't be afraid to negotiate your SLA, because these can have a direct impact on cash flow.”

What else? “Definitely get a lawyer to look at your agreement,” he adds. “We saved about £8,000 overal.”